06 October 2019 Business

HP restructures around the long term print opportuinty

HP is cutting overheads, saving $1 billion, and investing in driving the transition from analog to digital in professional print markets.

HP is cutting thousands of jobs as part of a plan to simplify its business under incline CEO Enrique Lores.

The company says it will save $1 billion in costs through a programme of up to 9,000 redundancies and non replacement of staff, some 16% of the workforce. “We are taking bold and decisive action as we embark on our next chapter,” he says.

That means tackling changes in the market where fewer documents are printed on home and office computers, cutting the need for desktop printers and the ink that goes with them. While not in the same league as Kodak’s problems as photographic film died, HP is taking action ahead of being forced to do so. Revenue from print supplies fell 4.5% in the year.

There are changes in the desktop print model, increasing the price of the hardware while allowing customers to use third party inks on HP printers. At the same time the company is emphasising its role in the disruption of industries, led by professional printing of textiles, packaging and into 3D printing.

HP has also struck a deal to supply Xerox with office printer requirements.

These are growth markets, 4% over the next five years for general commercial printing, 9% for textiles, 7% for labels and 25% for packaging. In the first half of this financial year compared to 2018, the number of publishing pages printed on its press increased 30%; commercial pages increased 10% and volume of labels rose 10%.

However, the desktop is where the money has been for HP. Office and home printing amount to a total addressable market of $135 billion compared to $20 billion from media.

In the longer term, which Lores is shaping for, the total addressable market saved by its graphic systems business and by the expanding 3D opportunity in automotive, healthcare, footwear and dental amounts to $500 billion.

It amounts to a series of bold moves for the business he told analysts, amounting to a sound investment proposition and a new chapter for HP.

HP restructures

HP is planning to reduce overheads by $1 billion a year through elimination of up to 9,000 jobs, a move that will cost $1 billion. It is necessary to cope with changing market conditions, technology and how consumers and office printing is shrinking.